Amid times of economic uncertainty — an upcoming federal election and tense relations with the U.S. — Canadians are waiting for the next Bank of Canada (BoC) interest rate announcement.
The central bank has made two 0.25 per cent cuts to its key interest rate so far this year, with the last one on March 12 bringing the rate to 2.75 per cent.
That announcement came a week after U.S. President Donald Trump imposed a 25 per cent tariff on all Canadian goods, and Canada retaliated with counter-tariffs. The BoC claimed the Canadian economy entered the year in a “solid position,” saying GDP showed robust growth, and inflation was finally close to the two per cent target.
However, with economic aggression from the U.S., BoC officials predicted a slower pace of economic activity and increased inflationary pressures in Canada. The latter concern contributed to the decision to lower the policy rate by a quarter point.
The last BoC update did not come with an extensive monetary policy report and commentary, but the one on Wednesday, April 16, will contain both.
So, what’s next?
Expectations from the BoC
On Wednesday, Trump announced a 90-day tariff hold for several countries, but unfortunately, Canada was not among them.
Keeping this in mind, we spoke to Ratehub.ca mortgage expert Penelope Graham, who has shared extensive insights and accurate market predictions with us in the past.
“While markets experienced a historic rally following Mr. Trump’s announcement that he would prolong reciprocal tariffs on most nations for up to 90 days, the reality of permanent economic damage is setting in,” she said.
“While Canada has largely dodged the worst of the tariff pain, the BoC’s policymakers will be assessing the impact on our trade partners and the effect at home. The central bank will also be weighing plummeting consumer and business sentiment, based on its own quarterly survey.”
She added that unfortunately “a quarter-point rate cut is most likely [on Wednesday] to help Canadians shore up amid this unprecedented economic backdrop.”
Graham also noted that extreme market volatility has caused large swings in bond yields: “While the Government of Canada five-year yield briefly touched a three-year low in the 2.4 per cent range, that reversed mid-week when spooked investors turned their back on even traditionally safe-haven investments, causing a large sell-off.”
This activity has stabilized now, but yields are still in the upper 2.7 per cent range, which could put upward pressure on fixed mortgage rates.
Homebuyers in Canada are understandably hesitant. Recent data from Toronto shows sales continuing to dip by double-digit percentages.
Graham believes that despite Canada’s exemption from it, Trump’s recent 90-day tariff rollback might stabilize market sentiment.
“Combined with slightly lower mortgage rates, that could lead to a pickup in activity, should buyer confidence return. However, this all hinges on how the trade war situation evolves and whether the Canadian economic picture remains healthy,” she noted.
Changes to your mortgage
Here’s a hypothetical scenario using Ratehub.ca’s mortgage payment calculator and the average home price in Canada in February 2025 — $668,097 — per the Canadian Real Estate Organization (CREA).
You’re a homeowner who put a 10 per cent downpayment on a $668,097 home with a five-year variable rate of 3.95 per cent amortized over 25 years (total mortgage amount of $619,927). You have a monthly mortgage payment of $3,244.
If a third 0.25 per cent interest rate comes on April 16, your variable mortgage rate will decrease to 3.70 per cent, and your monthly payment will decrease to $3,161.
This means you’ll pay $83 less per month, or $996 less per year, on your mortgage payments.
Upcoming Bank of Canada rate announcements
In the next interest rate update, the BoC will publish its next full outlook for the economy and inflation, including “risks to the projection,” in the monetary policy report.
Keep an eye on the Bank of Canada website at 9:45 a.m. EDT on the following dates:
- Wednesday, April 16, 2025 (rate update, monetary policy report and commentary)
- Wednesday, June 4, 2025 (rate update only)
- Wednesday, July 30, 2025 (rate update, monetary policy report and commentary)
- Wednesday, Sept. 17, 2025 (rate update only)
- Wednesday, Oct. 29, 2025 (rate update, monetary policy report and commentary)
- Wednesday, Dec. 10, 2025 (rate update only)
